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According to the Liquidity Preference Model, If the Federal Reserve

question 96

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According to the liquidity preference model, if the Federal Reserve increases the money supply, the equilibrium interest rate _____, and this leads to a(n) _____ in the quantity demanded of nonmonetary interest-bearing financial assets.


Definitions:

Snob Effect

Negative network externality in which a consumer wishes to own an exclusive or unique good.

Bandwagon Effect

Positive network externality in which a consumer wishes to possess a good in part because others do.

Network Externalities

Benefits or detriments to a product's value that result from the number of users the product has.

Negative Network Externalities

Adverse effects on a user of a product or service because the number of other users is too large or incompatible in some way.

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